No.

10-1372

In The

For The Second Circuit

Barclays Capital Inc.,

Plaintiffs-Appellees,
v.
Theflyonthewall.com, Inc.,
Defendant-Appellant.

On Appeal From The United States District Court

For The Southern District of New York

BRIEF OF AMICI CURIAE GOOGLE INC. AND TWITTER, INC. IN SUPPORT OF

REVERSAL
June 21, 2010 Kathleen M. Sullivan (counsel of record)
Marc L. Greenwald
Jonathan B. Oblak
Todd Anten
Quinn Emanuel Urquhart & Sullivan, LLP
51 Madison Ave., 22nd Floor
New York, NY 10010
(212) 849-7000
Counsel for amici curiae

CORPORATE DISCLOSURE STATEMENT

Pursuant to Fed. R. App. P. 26.1 and 29(c), amici make the following disclosures:
Google Inc. (“Google”) has no parent corporation, and no publicly held corporation
owns 10% or more of Google’s stock.
 Twitter, Inc. (“Twitter”) has no parent corporation, and no publicly held
corporation owns 10% or more of Twitter’s stock.

TABLE OF CONTENTS

TABLE OF AUTHORITIES iv

STATEMENT OF CONSENT TO FILING vii

STATEMENT OF INTEREST 1

SUMMARY OF ARGUMENT 2

ARGUMENT 6

I. “HOT NEWS” MISAPPROPRIATION RUNS AFOUL OF THE

COPYRIGHT CLAUSE OF THE CONSTITUTION AND THE
COPYRIGHT ACT 6

A. Under Feist, Facts Are In The Public Domain 6

B. “Hot News” Misappropriation Violates Feist 8

1. The Copyright Clause prohibits the removal of

factual information from the public domain 9

2. “Sweat of the brow” cannot justify protecting

ownership in facts 10

3. The “extra elements” that purport to preclude

preemption are the same elements rejected in Feist 10

C. Important Practical and Public Policy Concerns Justify This

Court’s Rejection of “Hot News” Misappropriation 12

II. ANY “Hot News” Misappropriation Should Be EXTREMELY

LIMITED, Mirroring THE FACTS of INS 14

A. The Court Should Limit “Hot News” Misappropriation

Claims To a Narrow Set of Commercial Competitors 14

B. The District Court Improperly Expanded The “Direct

Competition” Element Of Motorola 17

III. The Scope of the District court’s Injunction Violates the First
Amendment 19

A. The Reporting Of Facts Cannot Be Enjoined Absent

“Extraordinary Circumstances” 20
 B. “Extraordinary Circumstances” Cannot Be Present When
The Factual Information Is Already In The Public Domain 23

C. Less Intrusive Measures Are Available To

Appellees 24

D. The District Court Undervalued First Amendment

Constraints On Intellectual Property Law 26

CONCLUSION 28

CERTIFICATE OF COMPLIANCE WITH RULE 32(a) 29

CERTIFICATE OF SERVICE 30

TABLE OF AUTHORITIES

Page(s)

Cases

Attia v. Soc’y of N.Y. Hosp.,

201 F.3d 50 (2d Cir. 1999) 8

Bartnicki v. Vopper,
532 U.S. 514 (2001) 6, 14, 23, 24

Bridge C.A.T. Scan Assocs. v. Technicare Corp.,

710 F.2d 940 (2d Cir. 1983) 27

CBS Inc. v. Davis,

510 U.S. 1315 (1994) 5, 23, 26, 28

Cox Broad. Corp. v. Cohn,

420 U.S. 469 (1975) 21

Eldred v. Ashcroft,
537 U.S. 186 (2003) 8

Erie R.R. v. Tompkins,

304 U.S. 64 (1938) 9

Feist Publ's, Inc. v. Rural Tel. Serv. Co.,

499 U.S. 340 (1991) passim

Florida Star v. B.J.F.,

491 U.S. 524 (1989) 22, 23
Houchins v. KQED, Inc.,
438 U.S. 1 (1978) 14

In re Application of Dow Jones & Co.,

842 F.2d 603 (2d Cir. 1988) 6, 25

Int'l News Serv. v. Associated Press,

248 U.S. 215 (1918) passim

Itar-Tass Russian News Agency v. Russian Kurier,

153 F.3d 82 (2d Cir. 1998) 10

Kewanee Oil Co. v. Bicron Corp.,

416 U.S. 470 (1974) 24

Merrill Lynch & Co., Inc. v. C.I.R.,

386 F.3d 464 (2d Cir. 2004) 21

Miami Herald Publ’g Co. v. Tornillo,

418 U.S. 241 (1974) 15, 21

N.Y. Mercantile Exch., Inc. v. IntercontinentalExchange, Inc.,

497 F.3d 109 (2d Cir. 2007) 8

Nat’l Basketball Ass’n v. Motorola, Inc.,

105 F.3d 841 (2d Cir. 1997) passim

Near v. Minnesota ex rel. Olson,

283 U.S. 697 (1931) 23

Nebraska Press Ass’n v. Stuart,

423 U.S. 1319 (1975) 25

Nebraska Press Ass’n v. Stuart,

427 U.S. 539 (1976) 4, 22

Nihon Keizai Shimbun, Inc. v. Comline Bus. Data, Inc.,

166 F.3d 65 (2d Cir. 1999) 29

Oklahoma Publ’g Co. v. District Court,

430 U.S. 308 (1977) 26

Sarl Louis Feraud Int’l v. Viewfinder, Inc.,

489 F.3d 474 (2d Cir. 2007) 29, 30

Singleton v. Wulff,
428 U.S. 106 (1976) 21

Smith v. Daily Mail Publ’g Co.,

443 U.S. 97 (1979) 22, 23, 25
 Snepp v. United States,
444 U.S. 507 (1980) 27

Sparaco v. Lawler, Matusky, Skelly, Eng’rs LLP,

303 F.3d 460 (2d Cir. 2002) 8

United States v. Morton Salt Co.,

338 U.S. 632 (1950) 24

United States v. Quattrone,

402 F.3d 304 (2d Cir. 2005) 25

Constitutional and Statutory Provisions

U.S. Const. art. I, § 8, cl. 8 2, 7, 10

U.S. Const. art. VI, cl. 2 10

17 U.S.C. § 301(b) 12

Other Authorities

Richard A. Posner,
Misappropriation: A Dirge, 40 Hous. L. Rev 621 (2003) 12

William F. Patry,
Copyright Law & Practice (BNA, 1998 suppl.) 10

William F. Patry,
Patry on Copyright (2010) 10, 12

STATEMENT OF CONSENT TO FILING

Amici are authorized to file this brief pursuant to Fed. R. App. P. 29(a), as all parties have
consented to its filing.

vii

STATEMENT OF INTEREST[1]

Google Inc., a web-based company headquartered in Silicon Valley, California with over
10,000 employees, connects millions of people around the world with information every day,
with a mission to organize the world’s information and make it universally accessible and
useful. Twitter, Inc., a web-based company headquartered in San Francisco, California with
175 employees, has over 100,000 registered users and is one of the web’s most popular hosts of
user-generated content, allowing users to instantly share information around the world. Among
other things, amici provide services to help users find news-related content on the web. Such
services include traditional Internet search engines, microblogging, and news aggregation.[2]

Amici are interested in this case because the district court’s ruling as it relates to “hot news”
misappropriation could seriously impair the distribution of factual information on the Internet.
The language employed by the district court is broad enough to encompass (and potentially
prohibit) activities that are widely accepted and relied upon in the online dissemination of
factual content. Amici seek to inform the Court of the negative impact the district court’s
decision might have on a wide variety of Internet services that are relied on by the public to
quickly find and access relevant information.

SUMMARY OF ARGUMENT

The decision below, by enjoining the publication of facts that are in the public domain, departs
sharply from well-established precedent.

As recognized in Feist Publications, Inc. v. Rural Telephone Service Co., “[t]he first person
to find and report a particular fact has not created the fact; he or she has merely discovered
its existence.” 499 U.S. 340, 347 (1991). For that reason, even competitors “remain[] free to
use the facts contained in another’s publication to aid in preparing a competing work.” Id. at
349. Central to Feist is the rejection of the notion that “sweat of the brow” can itself create
intellectual property rights. “The primary objective of copyright is not to reward the labor of
authors, but ‘to promote the Progress of Science and useful Arts.’” Id. (quoting U.S. Const.
art. I, § 8, cl. 8).

The so-called “hot news” misappropriation tort undermines this constitutional principle by
creating state-law property rights premised impermissibly on an initial publisher’s “sweat
of the brow.” Derived from the now non-binding decision of International News Service
v. Associated Press (“INS”), 248 U.S. 215 (1918), “hot news” misappropriation grants a
monopoly to the gatherer of “time-sensitive” news, precluding a competitor from
disseminating those facts even when the same news is readily available from other sources.
The tort makes actionable a defendant’s supposed “free-rid[ing] on the efforts of the plaintiff”
in a way that would “reduce the incentive to produce the product or service.” Nat’l Basketball
Ass’n v. Motorola, Inc. (“Motorola”), 105 F.3d 841, 845 (2d Cir. 1997). By prohibiting the
publication of facts to protect a newsgatherer’s “efforts,” the “hot news” misappropriation tort
attempts an end-run around the Copyright Clause that Feist prohibits. This Court therefore
should repudiate the tort.

Important public policy concerns also support repudiation of this tort. It is longstanding
industry practice for news organizations to report on other outlets’ breaking stories (e.g.,
“CNN.com is reporting the possible presence of a bomb in Times Square”). For decades,
television and radio news stations have broadcast information obtained from newspapers.
And newspapers and Internet news organizations learn and write about events originally
reported on television. Permitting “hot news” misappropriation liability would leave news
outlets unsure how long they must “sit” on important factual information, depriving the public
of important, time-sensitive, factual information. In a world of modern communications
technology, where anyone with a cell phone may disseminate news throughout the world even
as it is occurring, the notion that a single media outlet should have a monopoly on time-
sensitive facts is not only contrary to law, it is, as a practical matter, futile.[3]

Even if the Court elects not to repudiate “hot news” misappropriation, it should limit the
district court’s unjustified expansion of the tort far beyond the narrow facts of INS. In INS,
the defendant and the plaintiff were in precisely the same business—wire services providing
breaking news stories to subscribing newspapers. As this Court has already suggested, the tort
should be limited, at most, only to situations analogous to those circumstances. See Motorola,
105 F.3d at 851 (describing “narrow ‘hot news’ INS-type claims” as surviving preemption).

Regardless of whether the Court chooses to address the scope of “hot news” misappropriation,
injunctive relief such as that fashioned by the lower court violates the First Amendment as
a prior restraint. The reporting of truthful information is one of the most protected forms of
speech under the Constitution, and enjoining such speech is a “most extraordinary remed[y],”
Nebraska Press Ass’n v. Stuart, 427 U.S. 539, 562 (1976), imposed only “where the evil
that would result from the reportage is both great and certain and cannot be militated by less
intrusive measures.” CBS Inc. v. Davis, 510 U.S. 1315, 1317 (1994).

The district court erred in failing to recognize a newsgatherer’s interests may be protected
by means less restrictive than an injunction. For example, newsgatherers may enter into
confidentiality agreements with employees, and into licensing or non-disclosure agreements
with authorized recipients of factual information, enforcing their rights through claims such
as breach of contract, intentional interference with contractual relations, and breach of duty
of loyalty. Newsgatherers also may implement technological measures to block public access
to information they have gathered. Where such alternatives are readily available, enjoining
media outlets that disseminate truthful information is unwarranted.

The injunction below is all the more inappropriate where the factual information at issue is
readily available to the public.[4] While it may be more convenient for newsgatherers to
seek injunctions against websites that disseminate once-confidential facts rather than ferret
out those who wrongfully “leak” that information in the first place, such an approach violates
a fundamental tenet of the First Amendment: Once facts are made public, they belong to
the public. See In re Application of Dow Jones & Co., 842 F.2d 603, 608 (2d Cir. 1988)
(“The most offensive aspect of a prior restraint is the censorship involved by forbidding
the dissemination of information already known to the press and therefore public.”); cf.
Bartnicki v. Vopper, 532 U.S. 514, 534-35 (2001) (broadcasting of lawfully obtained telephone
conversation protected by First Amendment, even if third party’s recording of conversation
was illegal).

For these reasons, this Court should clarify that dissemination of factual information may not
be enjoined absent a contractual or other special relationship, and vacate the injunction entered
below as an unconstitutional prior restraint.
ARGUMENT

I. “HOT NEWS” MISAPPROPRIATION RUNS AFOUL OF THE

COPYRIGHT CLAUSE OF THE CONSTITUTION AND THE COPYRIGHT
ACT
 A. Under Feist, Facts Are In The Public Domain

In Feist, the Supreme Court held: “That there can be no valid copyright in facts is universally
understood.” 499 U.S. at 344. It clarified that “originality, not ‘sweat of the brow,’ is the
touchstone of copyright protection in … fact-based works.” Id. at 359-60; see also id. at 364
(“copyright rewards originality, not effort”). In other words, factual information may not be
copyrighted, no matter how much labor was invested in gathering and compiling it. The Court
continued:

[A] subsequent compiler remains free to use the facts contained in an another’s
publication to aid in preparing a competing work …. It may seem unfair
that much of the fruit of the compiler’s labor may be used by others without
compensation…. [H]owever, this is not some unforeseen byproduct of a
statutory scheme. It is, rather, the essence of copyright, and a constitutional
requirement. The primary objective of copyright is not to reward the labor of
authors, but “to promote the Progress of Science and useful Arts.” U.S. Const.
art. I, § 8, cl. 8.

Id. at 349 (citations and quotation marks omitted, emphasis added).

Feist’s reliance on the Copyright Clause compels two conclusions: (1) a work must be original
to qualify for copyright protection; and (2) the freedom to use facts—even to “free-ride” on
facts gathered by others through great effort—is constitutionally protected. The Copyright
Clause demands that, in order to “promote the Progress of Science and useful Arts,” non-
original works such as facts are available to any person to use and exploit, regardless of
who discovered those facts or at what expense.[5] See also Eldred v. Ashcroft, 537 U.S.
186, 219 (2003) (“every … fact in a copyrighted work becomes instantly available for public
exploitation at the moment of publication”) (citing Feist, 499 U.S. at 349-50).

Under Feist, this Court has repeatedly confirmed that facts must remain in the public domain,
free from any restraint or encumbrance. See, e.g., N.Y. Mercantile Exch., Inc. v.
IntercontinentalExchange, Inc., 497 F.3d 109, 114 (2d Cir. 2007) (“[A]ll facts—scientific,
historical biographical, and news of the day … may not be copyrighted and are part of
the public domain available to every person.”) (quoting Feist, 499 U.S. at 348, emphases
added); Sparaco v. Lawler, Matusky, Skelly, Eng’rs LLP, 303 F.3d 460, 466-67 (2d Cir. 2002)
(“[H]istorical, scientific, or factual information belongs in the public domain, and … allowing
the first publisher to prevent others from copying such information would defeat the objectives
of copyright by impeding rather than advancing the progress of knowledge.”); Attia v. Soc’y
of N.Y. Hosp., 201 F.3d 50, 54 (2d Cir. 1999) (recognizing that it has become “accepted as
orthodox that ideas, like facts, belong in the public domain”).

B. “Hot News” Misappropriation Violates Feist

The decision in Feist warrants reexamination of the ownership of facts permitted in INS,
a 1918 decision issued under federal common law. In INS, the Supreme Court rested its
decision on “the expenditure of labor, skill, and money” necessary to gather the facts. See
248 U.S. at 239. It reasoned that, if others were to free-ride on the newsgatherer’s efforts, the
newsgatherer would have little incentive to continue. Id. In other words, newsgatherers may
secure property rights in facts and block competitors from repeating them—the very logic
rejected by the Supreme Court in Feist. While INS is no longer binding pursuant to Erie R.R.
v. Tompkins, 304 U.S. 64 (1938), this Court nonetheless gave the tort new life in Motorola,
holding that a narrow, “hot news” claim, mirroring INS-type circumstances, exists under New
York state law. See Motorola, 105 F.3d at 852. That decision should be revisited by this
Court.

1. The Copyright Clause prohibits the removal of factual

information from the public domain

“Hot news” misappropriation is not compatible with constitutional principles enunciated in

Feist. The Copyright Clause leaves facts in the public domain for all to freely use, precluding
any claim of a property right in those facts. See Feist, 499 U.S. at 349 (it is a “constitutional
requirement” that a competitor “remains free to use the facts contained in an another’s
publication to aid in preparing a competing work”); id. at 350 (“[R]aw facts may be copied at
will. This result is neither unfair nor unfortunate. It is the means by which copyright advances
the progress of science and art.”). In other words, the freedom to copy facts at will is an
essential component of “promot[ing] the Progress of Science and useful Arts.” U.S. Const.
art. I, § 8, cl. 8.

Motorola, however, does not address the tension between Feist and INS. The state law tort
of “hot news” misappropriation is unenforceable because the Copyright Clause has been
construed to ban the removal of facts from the public domain, because application of “hot
news” misappropriation obstructs this constitutional mandate, and because states are precluded
from implementing laws that interfere with constitutional guarantees. See U.S. Const. art. VI,
cl. 2; see also 5 William F. Patry, Patry on Copyright §18:40 (2010) (detailing how “hot news”
misappropriation is precluded by the Copyright Clause).[6]

2. “Sweat of the brow” cannot justify protecting ownership

in facts

Feist expressly rejected “sweat of the brow” as a justification for protecting facts. “Hot news”
misappropriation, however, forbids use of factual information “that constitutes free riding
on the plaintiff’s efforts.” Motorola, 105 F.3d at 845. Thus, “hot news” misappropriation
sidesteps the Copyright Clause by punishing the copying of facts to protect the gatherer’s
“efforts”—permitting the very theory rejected in Feist.[7]

3. The “extra elements” that purport to preclude

preemption are the same elements rejected in Feist

The “extra elements” articulated by this Court in Motorola that are intended to save the tort
of “hot news” misappropriation from preemption are the same factors that were rejected in
Feist as invalid under copyright law. For example, the extra elements of “free-riding by
a defendant” and “the threat to the very existence of the product or service,” Motorola,
105 F.3d at 847, were explicitly rejected in Feist when the Court ruled that free-riding on
the collection of facts, no matter the effect on the collector, is not only constitutionally
permissible, but constitutionally unassailable. See Feist, 499 U.S. at 349. Because a “hot
news” misappropriation claim is nothing more than a failed copyright claim, it is preempted by
§ 301(b)(1) of the Copyright Act as “com[ing] within the subject matter of copyright.”[8] This
Court should revisit Motorola and reject the tort. See Richard A. Posner, Misappropriation:
A Dirge, 40 Hous. L. Rev 621, 632-33 (2003) (analyzing Motorola and concluding that, if
the publication of facts is not copyrightable, the same reasons “weigh equally heavily against
finding misappropriation” when such facts are published under the label of “hot news”).

C. Important Practical and Public Policy Concerns Justify This

Court’s Rejection of “Hot News” Misappropriation

In an age of instantaneous, global dissemination of factual information over the Internet, cable,
and satellite, a tort of “hot news” misappropriation is obsolete. The world no longer faces the
INS/AP news duopoly addressed in 1918; rather, factual collection and dissemination now
come from a wide array of sources. The INS rationale was dubious even 92 years ago, see INS,
248 U.S. at 248-67 (Brandeis, J., dissenting), and is incompatible with the realities of today’s
information marketplace.

First, the tort conflicts with the longstanding, widely employed and unchallenged industry
practice for news outlets to report on stories that have been broken by other organizations.
Cable and broadcast television news programs, as well as multitudes of other news outlets,
feature constant streams of news, with or without attribution to their original sources.
News reporting always has been a complex ecosystem, where what is “news” is often driven
by certain influential news organizations, with others republishing or broadcasting those
facts—all to the benefit of the public. The district court, however, would grant the original
news source a temporary monopoly over such facts—an outcome that is inconsistent with the
strong public interest in receiving important, timely news. See, e.g., Houchins v. KQED, Inc.,
438 U.S. 1, 30 (1978) (recognizing the First Amendment “right of the public to receive such
information and ideas as are published”).

Second, continued recognition of the tort will chill the lawful dissemination of important news
by fostering uncertainty among news outlets as to how long they must “sit” on a story before
they are free of a potential “hot news” claim. See Bartnicki, 532 U.S. at 534 n.22 (warning
against “the ‘timidity and self-censorship’ which may result from allowing the media to be
punished for publishing truthful information”) (citation omitted). Breaking news may involve
a threat to public health or security, but the district court’s opinion, if affirmed, would stifle the
dissemination of such crucial facts—a particularly dangerous outcome in circumstances where
the time-sensitive nature of the event is the precise reason why the facts should be widely
disseminated as quickly as possible.

Upholding the district court’s decision also would give those who obtain news first strong
incentives to block others from obtaining the same information, such as by encouraging
(or even paying) sources not to cooperate with other organizations who attempt to confirm
or expand on the original news organization’s reporting. There also is grave difficulty
implementing any period of exclusivity: how would a court pick a time period during which
a fact about the Times Square bomb would be non-reportable by others? Judges will become
“super-editors,” a role the Supreme Court has rejected in other contexts as unconstitutional.
See Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241, 258 (1974) (finding state statute to
violate First Amendment “because of its intrusion into the function of editors”).
Third, even if “hot news” misappropriation made sense in 1918, it does not today. The modern
ubiquity of multiple news platforms renders “hot news” misappropriation an anachronism,
aimed at muzzling all but the most powerful media companies. In a world of citizen journalists
and commentators, online news organizations, and broadcasters who compete 24 hours a day,
news can no longer be contained for any meaningful amount of time. Because it would be
impossible to craft and enforce a rule restricting the dissemination of readily accessible factual
information, this Court should recognize that “hot news” misappropriation can no longer be
practically or fairly applied.

II. ANY “Hot News” Misappropriation Should Be EXTREMELY

LIMITED, Mirroring THE FACTS of INS

Should the Court choose not to repudiate “hot news” misappropriation, amici respectfully
request that the Court clarify that the tort is available only in a narrow set of circumstances
nearly identical to those of INS. Such an approach would be faithful to this Court’s decision
in Motorola, and provide needed guidance as to the boundaries of the tort.

A. The Court Should Limit “Hot News” Misappropriation Claims

To a Narrow Set of Commercial Competitors

The INS dispute began when British censors barred INS, but not AP, from sending overseas
cables about World War I to the United States. To compete, INS viewed publicly posted
news bulletins containing AP stories, paraphrased those stories, and sent them to west-coast
member newspapers by telegraph. As a result, INS was able to publish its “pirated news”
simultaneously or even earlier than AP on the west coast. INS, 248 U.S. at 238-39.

In Motorola, this Court emphasized the narrowness of “hot news” misappropriation, tightly
tying the tort to the facts of INS. See 105 F.3d at 851 (only “narrow ‘hot news’ INS-type
claims survive preemption”); id. at 852 n.7 (“INS has long been regarded with skepticism by
many courts and scholars and often confined strictly to its facts.”); id. at 854 n.9 (comparing
plaintiffs’ “hot news” claim to the facts of INS and concluding that a “gulf [exists] between
this case and INS”).

To the extent INS remains good law, the doctrine should be updated to incorporate the vast
changes since Motorola in how news is disseminated online. That is, the Court should clarify
that any “hot news” claim must closely track the facts in INS, while accounting for the way
facts are disseminated in the modern world. This would be accomplished by adding the
following specific extra elements to satisfy 17 U.S.C. § 301: (1) the information plaintiff seeks
to protect must have been gathered exclusively by plaintiff (2) at substantial cost or effort; (3)
plaintiff must have taken steps to keep the information confidential or highly restricted until
its release; (4) plaintiff’s release of the information must be to a restricted audience, and not
be accessible to the general public; (5) the information must have commercial value; (6) the
information must be time-sensitive, and defendant’s use of the information must specifically
exploit its time-sensitive nature; (7) plaintiff and defendant must be direct competitors for
the commercial value of the particular information in question; and (8) as a direct result of
defendant’s use of the time-sensitive information, plaintiff’s ability to produce the product or
service will be severely impaired. Such a test would hew closely to INS and retain the essence
of the Court’s holding in Motorola, while properly accounting for the modern reality of news
dissemination.
Online services such as those offered by amici do not resemble INS’s facts, nor meet the
above test. For example, “hot news” misappropriation would not apply to news aggregators
that enable users to find factual information readily available from other sources. In addition,
because aggregators direct users to the source site of the article, they provide newsgatherers
with substantial economic benefits. Likewise, hosts of user-generated content such as Twitter
merely provide a venue for third parties to post information and commentary, and thus are not
themselves in competition with newsgatherers.

Further, news aggregators do not displace the original news source, because they cannot link
to stories until those stories are publicly available. Similarly, users of social networking
services such as Twitter, who post facts or commentary regarding news stories, are relaying
information already in the public domain. This is in stark contrast to INS, where INS was
able to free-ride on AP-originated content on the west coast because of the three-hour time
difference. The Internet has no time zones—once a news article is made publicly available,
it is available to all. Thus, it is consistent with the Court’s approach in Motorola to exclude
from the tort circumstances where the ability of an online outlet to disseminate information is
dependent on the public disclosure of the information.

B. The District Court Improperly Expanded The “Direct

Competition” Element Of Motorola

In addressing the “direct competition” element of “hot news” misappropriation, Motorola, 105
F.3d at 852—the district court offered multiple bases supporting its conclusion that Appellant
and Appellees directly compete. While amici take no position as to most of these bases, one
of the district court’s grounds is faulty as a matter of law and should be corrected.

The district court stated:

[T]o the extent that Fly argues that it does not compete with
the Firms because it reports “news” about the Recommendations
rather than the Recommendations itself—a theoretical
distinction not borne out in reality—such an argument
apparently overlooks the fact that “news” is, in fact, the
archetypal subject matter of a hot-news misappropriation claim.

March 18 Order at 69. The district court confuses “direct competition” with “competition” in
general. Amici, for example, are not engaged in the sort of head-to-head direct competition
exemplified by INS, which provided news stories to subscribing newspapers that directly
competed with AP’s news stories. See also Motorola, 105 F.3d at 853 (recognizing that
identical products providing identical services would “directly compete”). Different entities
may use news in different ways, and the fact that two businesses use the same underlying
subject matter does not necessarily make them competitors. Expanding “direct competition”
to include all uses of news—even just short headlines or snippets of a story in the form of
a bibliographic entry—would potentially bring within the “direct competition” element the
dissemination of a single, small fact, thereby transforming the element beyond even plain
“competition” into an exclusive right over noncopyrightable material, in violation of Feist.
In addition, the district court suggests that an outlet reporting facts it has gathered always
directly competes with an entity discussing the outlet’s report, simply because they both
trade in the general subject of news. Such an approach lumps all “news” into one mass of
information without regard for the context of how such facts are developed and disseminated.
Appellees developed trading recommendations for clients, and Appellant reported the fact
that Appellees had issued such opinions. What began as Appellees’ advice became news
because such opinions can, and often do, affect the financial markets, which have an impact
on every person with a savings account. Regardless of whether Appellant and Appellees
“directly” compete under a proper test, the Court should reject the wholesale proposition that
all disseminators of information are direct competitors, with a right to forbid others (to whom
they have no contractual or special duty) from reporting the same information.

III. The Scope of the District court’s Injunction Violates the First
Amendment

Separate and independent from clarifying the existence or scope of the tort of “hot news”
misappropriation, this Court should hold that the lower court’s injunction against the reporting
of publicly available factual information constitutes an unconstitutional prior restraint in
violation of the First Amendment.[9]

A. The Reporting Of Facts Cannot Be Enjoined Absent

“Extraordinary Circumstances”

News reporting is among the highest forms of protected speech, zealously safeguarded by
the First Amendment. See Nebraska Press Ass’n, 427 U.S. at 559 (“[P]rior restraints on
speech and publication are the most serious and the least tolerable infringement on First
Amendment rights.”). An action to punish “the publication of truthful information seldom can
satisfy constitutional standards.” Smith v. Daily Mail Publ’g Co., 443 U.S. 97, 102 (1979).
Specifically, if a news outlet “lawfully obtains truthful information about a matter of public
significance then state officials may not constitutionally punish publication of the information,
absent a need to further a state interest of the highest order.” Id. at 103; see also ; Florida
Star v. B.J.F., 491 U.S. 524, 541 (1989) (“[W]here a newspaper publishes truthful information
which it has lawfully obtained, punishment may lawfully be imposed, if at all, only when
narrowly tailored to a state interest of the highest order.”).

State interests justifying an injunction are extraordinarily rare—although the prohibition

against prior restraints is not absolute, the gagging of news reporting has been approved
only in “exceptional cases.” Near v. Minnesota ex rel. Olson, 283 U.S. 697, 716 (1931)
(suggesting that exceptional cases include incitement to commit violence, obstruction of
military recruitment, disclosure of the movement of troops, and obscenity). As Justice
Blackmun, writing as Circuit Justice in staying an injunction, explained:

Even where questions of allegedly urgent national security, see

New York Times Co. v. United States, 403 U.S. 713 (1971),
or competing constitutional interests, Nebraska Press Ass’n,
427 U.S. at 559, are concerned, we have imposed this “most
extraordinary remed[y]” only where the evil that would result
 from the reportage is both great and certain and cannot be
militated by less intrusive measures.

CBS, 510 U.S. at 1317. In CBS, an injunction prohibiting the news reporting of an undercover
videotape that would disclose the plaintiff’s trade secrets and confidential information was
deemed an impermissible prior restraint, even though it was obtained through “calculated
misdeeds.” Id. at 1318. First Amendment protection has been granted in the face of interests
much stronger than the mere economic interest of Appellees. See, e.g., Bartnicki, 532 U.S.
at 534-35 (radio broadcast of illegally intercepted telephone call about newsworthy matter
protected by First Amendment); Florida Star, 491 U.S. at 536 (First Amendment outweighs
interest in prohibiting publication of wrongfully disclosed identity of rape victim); Smith, 443
U.S. at 104 (First Amendment outweighs interest in protecting identity of youths charged in
juvenile court).

There are limited circumstances where courts have granted injunctions against the reporting
of truthful information. For example, injunctive relief may be available if a party seeks
to disclose trade secrets in violation of a confidential relationship with the owner. See
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974). The district court, however,
made no finding of a confidential relationship between Appellant and Appellees. In addition,
the Supreme Court has not yet ruled out that a state might have a sufficient interest in
enjoining “disclosures of trade secrets or domestic gossip or other information of purely
private concern.” Bartnicki, 532 U.S. at 533. The Court need not answer that question here,
as information subject to “hot news” misappropriation is, by definition, “newsworthy.” Id.

Given that the Supreme Court has rejected injunctions even when the speech involves national
security, illegal wiretaps, and the privacy interests of crime victims, the district court’s
injunction is certainly inconsistent with established precedent.[10] Here, the only interest that
Appellees seek to protect are their economic interests. No court of which amici are aware has
ever held that a plaintiff’s mere economic interest was a “state interest of the highest order”
sufficient to enjoin news reporting of truthful information.[11] Smith, 443 U.S. at 103; cf.
CBS, 510 U.S. at 1318 (“If CBS has breached its state law obligations, the First Amendment
requires that [plaintiff] remedy its harms through a damages proceeding rather than through
suppression of protected speech.”).[12]

B. “Extraordinary Circumstances” Cannot Be Present When The

Factual Information Is Already In The Public Domain

“Extraordinary circumstances” can never exist when the factual information at issue is already
otherwise available in the public domain. The reason is simple: injunctions are not an
effective remedy to disclosure because the information may be obtained from other sources.
Indeed, this Court has stated that “[t]he most offensive aspect of a prior restraint is the
censorship involved by forbidding the dissemination of information already known to the press
and therefore public.” In re Application of Dow Jones & Co., 842 F.2d 603, 608 (2d Cir.
1988); see also Smith, 443 U.S. at 103 (“once the truthful information was ‘publicly revealed’
or ‘in the public domain’ the court could not constitutionally restrain its dissemination”)
(summarizing Oklahoma Publ’g Co. v. District Court, 430 U.S. 308 (1977)). While amici take
no position on whether Appellant received all of the facts at issue from the public domain,
or whether Appellant violated a contractual or other special duty, an injunction offers no
meaningful remedy where it prohibits dissemination of readily available facts.[13]

C. Less Intrusive Measures Are Available To Appellees

The district court failed to sufficiently consider alternative measures that might protect the
interests of Appellees that are far less intrusive than a prior restraint. See CBS, 510 U.S. at
1317 (prior restraint is available only “where the evil that would result from the reportage is
both great and certain and cannot be militated by less intrusive measures”).

First, to prevent leaks, originators of information may (and in this case did) enter
confidentiality agreements with employees and licensing or non-disclosure agreements with
authorized recipients of factual information. Such agreements permit enforcement of rights
to control dissemination of factual information through claims such as breach of contract,
intentional interference with contractual relations, breach of confidentiality, and breach of
duty. See, e.g., Snepp v. United States, 444 U.S. 507 (1980) (imposing constructive trust
on past profits and enjoining future publication of factual book otherwise protected by First
Amendment, based on author’s breach of employment agreement and breach of fiduciary
duty); Bridge C.A.T. Scan Assocs. v. Technicare Corp., 710 F.2d 940, 946 (2d Cir. 1983)
(court may enjoin a party “against use or disclosure of his trade secrets, as where a party
has obtained them by breaching its confidential relationship with the owner, or by procuring
another to breach a confidential relationship with the owner”). Appellees’ litigation efforts are
more properly aimed at those who breached a duty to retain the information in confidence.
Locating the source of such leaks is far less offensive to First Amendment principles than
enjoining the dissemination of truthful information obtained lawfully. To the extent the lower
court failed to exclude from the injunction the dissemination of information lawfully obtained
by Appellant, it is facially overbroad.

Second, newsgatherers can employ mechanisms to limit access to their content, including
technical barriers to prevent broad access to content they make available online. For example,
websites commonly use simple programming instructions known as “robots.txt” files to
communicate instructions (such as instructions not to link to material on the site) to search
engines and news aggregators. Such instructions are simple to implement, widely adopted,
and provide an automated way for a site to prevent search engines and aggregators from
linking to a web page. In addition, websites can restrict broad access to online content by
using password-protected platforms. To the extent that information is shielded by sufficient
technological measures, online services will not index content from such sites.[14]

The ready availability of such contractual and technological measures of self-protection

confirm that there are “less intrusive measures,” CBS Inc., 510 U.S. at 1317, that weigh against
the issuance of a prior restraint.

D. The District Court Undervalued First Amendment Constraints

On Intellectual Property Law

Finally, the district court suggested that First Amendment interests will not be recognized
in the face of an intellectual property violation. Incorrectly suggesting that cases such as
Bartnicki have no bearing when applied to a claim of “hot news” misappropriation, the district
court failed to strike the appropriate constitutional balance.

Intellectual property law does not render the First Amendment irrelevant. Copyright law to
which news reporting and aggregation organizations are subject, for example, is harmonized
with the First Amendment through the fair use doctrine. See, e.g., Nihon Keizai Shimbun,
Inc. v. Comline Bus. Data, Inc., 166 F.3d 65, 74-75 (2d Cir. 1999) (holding that defendant
abstract service infringed upon plaintiff’s factual news stories and recognizing that First
Amendment defense to copyright infringement is “protected by and coextensive with the fair
use doctrine”). Further, under copyright law, the First Amendment is sufficiently recognized
because a court may not recognize a copyright in the facts that provide the basis for news
articles—only in the manner of expression of those facts. See Feist, 499 U.S. at 348.

The district court’s citation to Sarl Louis Feraud Int’l v. Viewfinder, Inc., 489 F.3d 474 (2d
Cir. 2007), is misguided. Viewfinder never addressed an unfair competition claim, as the
district court suggested. Rather, at issue was whether infringement of copyrighted works
was protected by the First Amendment, which this Court held requires a fair use analysis
that addresses free speech concerns. See Viewfinder, 489 F.3d at 479. The district court’s
conclusion that First Amendment considerations may be ignored in intellectual property cases
is unfounded.

CONCLUSION

For the reasons discussed above, the Court should repudiate the tort of “hot news”
misappropriation. If the Court declines to reject the tort, it should restrict the tort’s application
to factual circumstances that mirror INS. As an independent basis, the Court should find that
an order enjoining the dissemination of truthful facts that were lawfully obtained constitutes
an impermissible prior restraint in violation of the First Amendment.

DATED: June 21, 2010 Respectfully submitted,

New York, New York

By s/ Kathleen M. Sullivan
Kathleen M. Sullivan (counsel of record)
Marc L. Greenwald
Jonathan B. Oblak
Todd Anten
Quinn Emanuel Urquhart
& Sullivan, LLP
51 Madison Avenue, 22nd Floor
New York, NY 10010
(212) 849-7000

Attorneys for amici curiae

Google Inc. and Twitter, Inc.

CERTIFICATE OF COMPLIANCE WITH RULE 32(a)

Pursuant to Fed. R. App. P. 32(a)(7)(C), the attached brief complies with the type-volume
limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains _______ words, excluding
the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with
the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed.
R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using
Microsoft Word 97-2003 in 14 point Times New Roman.

s/ Kathleen M. Sullivan June 21,

2010
Attorney for amici Google Inc. and Twitter, Inc. Date

CERTIFICATE OF SERVICE

30

[1] Pursuant to Local Rule 29.1(b), amici disclose that no party’s counsel authored this brief
in whole or in part; no party or party’s counsel contributed money intended to fund preparing
or submitting the brief; and no person other than amici contributed money intended to fund
preparing or submitting the brief.
[2] As used herein, the terms “news aggregators” and “news aggregation” refer to services
such as Google News (http://news.google.com) that index and provide online links to news
stories available elsewhere on the web. Some news aggregators, including Google News, also
offer third parties’ news articles in their entirety pursuant to licenses. In contrast, some other
online services exist that reproduce entire articles or create their own news stories based in part
on excerpts from other news outlets.
[3] See, e.g., http://www.editorsweblog.org/multimedia/2009/01/twitter_first_off_
the_mark_with_hudson_p.php (recounting how descriptions and pictures of the US Airways
landing in the Hudson first appeared on Twitter and concluding that “it was definitely Twitter
that broke the story first”).
[4] The district court indicated that Appellant’s role in the initial (and wrongful)
dissemination of the Recommendations contributed to its ruling, but concluded that “it is not
a defense to misappropriation that a Recommendation is already in the public domain by the
time Fly reports it.” Docket No. 137, Opinion and Order, dated March 18, 2010 (“March 18
Order”) at 61. Amici urge the Court to reject this conclusion.
[5] Congress has the power to decide which sorts of original works receive federal copyright
protection; there is no constitutional requirement that all original works be protected. Feist
makes clear that no non-original works may be protected through a statutory grant of exclusive
rights.
[6] Mr. Patry is senior copyright counsel at Google. The views and most of the language
employed in the treatise referenced above were contained in a different treatise published
before Mr. Patry joined Google. See 2 William F. Patry, Copyright Law & Practice 291
(BNA, 1998 suppl.). The Supreme Court has cited Mr. Patry’s works five times, including
in Feist and Harper & Row. This Court has cited Mr. Patry’s work at least twenty times, and
appointed him an expert to the Court in Itar-Tass Russian News Agency v. Russian Kurier, 153
F.3d 82 (2d Cir. 1998). Almost every circuit has cited Mr. Patry’s works.
[7] The Supreme Court had no opportunity to rule upon the validity of “hot news”
misappropriation in Feist, as the only issue before it was copyright infringement. Feist,
however, implicitly acknowledges the tension between the cases, recognizing that INS
rendered judgment on “noncopyright grounds that are not relevant here.” Feist, 499 U.S. at
354 n.*.
[8] As support for “hot news” misappropriation, the district court relies on legislative history
surrounding the passage of § 301(b)(3), which at one point included language stating that
“hot news” misappropriation would not be preempted by the Copyright Act. The history
of this language, however, does not support such reliance. In proposed revisions to the
Copyright Act offered in 1967, the preemption language stated that state law could only
protect unpublished works. This proposed language remained untouched until 1975, when
new revisions reversed course and provided a list of illustrative nonpreempted state laws,
including “misappropriation.” The committee reports accompanying these revisions included
language detailing the committee’s intention to preserve “hot news” misappropriation in the
mold of INS. The Justice Department, fearing “misappropriation” would serve as a backdoor
for failed copyright claims, requested that the “misappropriation” language be removed.
When the final version of the 1976 amendments came to the House floor, the illustrative
examples, including misappropriation, had been stricken. The reasons for the deletion are not
illuminated by colloquy between two members of the House. “The only approach to such a
morass is to ignore it and to determine solely from the statute whether the claim at hand is
preempted.” 5 Patry on Copyright § 18:8.
[9] In its order denying the defendant’s motion for a stay or modification of the injunction,
the district court suggested that Appellant waived its First Amendment defense. See Docket
No. 187, Opinion and Order, dated May 7, 2010 (“Stay Order”) at 13-14. While amici take
no position on that issue, “[t]he matter of what questions may be taken up and resolved for
the first time on appeal is one left primarily to the discretion of the courts of appeals, to be
exercised on the facts of individual cases.” Singleton v. Wulff, 428 U.S. 106, 121 (1976).
The Court is “more likely to exercise [its] discretion (1) where consideration of the issue is
necessary to avoid manifest injustice or (2) where the issue is purely legal and there is no
need for additional fact-finding.” Merrill Lynch & Co., Inc. v. C.I.R., 386 F.3d 464, 475
(2d Cir. 2004) (citation omitted). This case warrants such review, even if the argument was
waived. First, affirming this injunction would chill the free and unfettered reporting of factual
information by third-party news agencies. Thus, a review of the injunction is necessary to
avoid a manifest injustice to public interest in receiving factual information. Second, the First
Amendment argument raised by amici is a pure question of law. See, e.g., id. (considering new
argument on appeal, even in absence of manifest injustice, because “the issue is purely legal”).
Finally, the Court should employ its discretion to consider the First Amendment because “it
would be intolerable to leave unanswered, under these circumstances, an important question
of freedom of the press under the First Amendment; an uneasy and unsettled constitutional
posture [that] could only further harm the operation of a free press.” Tornillo, 418 U.S. at 247
n.6; see also Cox Broad. Corp. v. Cohn, 420 U.S. 469, 486-87 (1975) (exercising discretion to
hear First Amendment argument because failure to do so “would leave the press … operating
in the shadow” of civil sanctions).
[10] The district court distinguished Bartnicki and Smith on the basis that they “concerned the
relationship under the First Amendment between the news media’s interest in reporting about
important public events and individuals’ rights to privacy.” Stay Order at 15 n.15. Surely
an individual’s right to privacy is a stronger interest than a corporation’s private economic
interests. Cf. United States v. Morton Salt Co., 338 U.S. 632, 652 (1950) (“[C]orporations
can claim no equality with individuals in the enjoyment of a right to privacy.”).
[11] INS did not address the First Amendment.
[12] It is of no moment that the district court’s injunction is limited in time. See United
States v. Quattrone, 402 F.3d 304, 310 (2d Cir. 2005) (“A prior restraint is not constitutionally
inoffensive merely because it is temporary.”).
[13] The district court wrongly held that “it is not a defense to misappropriation that a
Recommendation is already in the public domain by the time Fly reports it.” March 18 Order
at 61. As explanation, the district court stated that “[i]n INS, … AP’s news was already
widespread and publicly available on the East Coast and was obtained by the defendant from
public sources, and yet, the Court granted an injunction against INS’s further dissemination
of news gained through those means.” Id. However, AP’s news was not already available on
the west coast, which is where AP claimed the misappropriation took place. This distinction
underscores why the tort no longer has relevance, given today’s technology.
[14] While amici take no position regarding whether Appellant wrongfully attempted to
circumvent such technological measures, this is a distinct issue from whether an injunction can
issue against an outlet that disseminates information that is already publicly available at the
time of publication, regardless of how that information was received.